TORONTO—In a move that takes square aim at the diagnostic
tests market, SQI Diagnostics Inc. has agreed to acquire all of the shares of
Scienion AG, a German-based microarray manufacturing equipment and
microarray
print and development services company.

Scienion, located in Dortmund and Berlin,
develops and
commercializes microarray printing and production systems and provides contract
microarray print and development services for the life
sciences industry. An
early objective of the new combined entity will be to "accelerate the
commercialization of our combined pipeline of custom
microarray diagnostic
products through the use of Scienion's microarray print expertise, arrayer
equipment and experience with complete print
solutions with SQI's automated
microarray platforms," according to a press release released by the companies.

In addition, Scienion's equipment sales will benefit from
SQI's strength in North America, while Scienion's sales and
engineering support
will be used to market SQI's suite of diagnostic products and services in
Europe. SQI will pay $15.6 million in cash for Scienion
and issue 735,294
common shares "in the capital of SQI." The closing of the transaction is
subject to a number of customary closing conditions and
regulatory approvals,
and is subject to financing.

In its preliminary short-form prospectus, SQI states
that
its SQiDworks is the "only FDA-cleared, fully-automated, microarray system and
multiplexing solution in our target markets, which can perform
qualitative or
quantitative testing for multiple biomarkers simultaneously." The company adds
that it is also developing a fully automated benchtop
diagnostic platform and a
small, semi-automated system.

SQI plans to continue to develop and seek
regulatory
approval for additional diagnostic tests, based on the assumption that
expanding its test menu will drive adoption of its platform and
products. The
addition of Scienion's "industry-leading print technologies" will enable the
new entity to "become a leader in sales of end-to-end
microarray-based
diagnostic systems, microarray printing and assay development services," the
company states.

At stake is a global immunoassay diagnostic test market that
SQI estimates will reach $10.3 billion in 2012. Of that, SQI is
strategically
focusing on a "directly addressable market of approximately $4.5 billion, which
includes immunological tests for autoimmune disease,
infectious disease and
allergenecity." These markets are estimated to be $1.5 billion, $2.4 billion
and $0.6 billion, respectively. SQI is targeting
these markets because multiple
biomarkers are measured to aid in the diagnosis and therapeutic monitoring of
these diseases, these markets are
comprised of large, high-volume facilities
which are typically underserved by fully automated, high-throughput,
multiplexed systems, and the tests
usually qualify for reimbursement by public
and private insurers in the United States, Canada and the European Union.

First up will be the autoimmune segment, which SQI sees as
the low hanging fruit for a number of reasons. The company notes
that only 10
disease states command most of the blood testing revenues for the entire
autoimmune test segment and that the most common tests for
autoimmune diseases
currently evaluate about 70 biomarkers or seven per disease. In addition, these
tests are generally run at high volumes at larger
test facilities and in
batches—not run on a one-off basis.

Finally, the company notes that "each
of the autoimmune
diagnostic tests we are developing has predicate technologies with FDA
clearance on older, single biomarker, manual titer plate
technology that we
intend to replace, and regulatory clearance for the majority of autoimmune
assays is through the FDA 510(k) process, which is well
established."